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Spending on Marketing Analytics

CMO Survey Results

I added a special section focusing on marketing analytics to the February 2012 issue of The CMO Survey. With all the talk about “big data” and the billions of dollars companies appear to pouring into capturing, processing, and leverage customer data, I thought it would be a good idea to examine where companies are on a few key issues and also where they expect to be over time on this strategic investment.

I asked top marketers to report what percentage of their marketing budgets they spend on marketing analytics. I think this is a reasonable request given that 70% of all top marketers state that the marketing analytics group reports to them. Results indicate that companies currently spend an average of 5.7% of their marketing budgets on marketing analytics and that this number is expected to grow to 9.1% in the next three years. This 60% increase represents a sizable shift. To put it in perspective, marketing budgets overall have grown 8.3% over the last two years. This growth varies by company size and industry sector. Looking at Table 1, we can see that, in general, current marketing analytic spending levels and expected growth levels correlate with company size (measured as revenues). There is a trough near the middle for companies between $500M-$999M, but otherwise the relationship is positive and significant. Examining sector differences in Table 2, we see that services companies, overall, spend more on marketing analytics now and will remain ahead of product companies in the next three years. From these figures, service companies appear to understand the “big data” opportunity and believe they can leverage it to create more value for their customers.

Table 1. Spending on Marketing Analytics by Company Size (in sales revenues)

Table 2. Spending on Marketing Analytics by Sector

I also asked top marketers to report on the number of company employees dedicated to marketing analytics currently and what they expect in three years. Results indicate that companies currently employ, on average, 5.8 people and expect this number to increase to 6.9 people. This increase reflects a 19% increase. Compared to the 60% increase we observe in spending on marketing analytics, these results tell us that firms will spend more on systems than on people during this big data boom. Human capital will grow, but it will grow less than the capital investments companies are going to make in marketing analytic systems. I predict that if I continue to ask these questions over time, this emphasis will shift. That is, once companies have systems in place, the key element will be people who can manage and leverage these systems in strategy decisions.

It’s also interesting how company size (in terms of revenues) is related to these hiring levels. Looking again at Table 1 but especially at the last two columns, we see very little difference in company expenditures until we hit the $1B mark at which point the average jumps from ~1.3 people up to 9.1 people for companies with $1B-9B in sales and then to an astonishingly high level of 26.4 people! Examining sectors, we see that product companies, overall, have dedicated more human capital to marketing analytics than service companies! This difference dissipates some in the next three years. Let me therefore revise my hypotheses about service companies appearing to understand the “big data” opportunity and believe they can leverage it to create more value for their customers. Instead, it appears that service companies might be playing catch up on systems whereas product companies are fine –tuning the human element of the marketing analytics equation. This later theory appears more valid given that product companies also appear to use marketing analytics in a greater percentage of their projects. Look at Table 3. There we see that B2C product companies in particular beat the rest of the sectors in the use of marketing analytics to drive decisions. I’ll return to this topic in my next blog—stay tuned.

Table 3. Use of Marketing Analytics by Sector